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Old 10-21-2018, 10:26 PM   #1
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Default How does this tax thing work?

I was told the business pays taxes after the money on the business bank account.
So the account has $1.300 balance because the LLC got $1300 check for a work but the supplies were $300. How does the IRS know that the LLC made $1000 while the account shows $1300? The $300 is not an income, just paint, drop cloth, tape...
The statement doesn't tell anything about supplies. Does it?

Maybe it is a stupid question but would be happy if someone explained.
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Old 10-21-2018, 10:41 PM   #2
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Just like someone with legal questions would be advised to consult a lawyer, you should be consulting an accountant. Not that you won’t get any good advice here, but remember, we are a bunch of painters.
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Old 10-22-2018, 12:03 AM   #3
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When you do your taxes in April they most likely will be based on your 2018 Profit & Loss statement, not your bank statement. Consult your accountant on your situation, if you do not have one, get one, as it will save you headaches at tax time.
But like all business you have income and expenses. What you can and cannot deduct as a business expense is under the tax code. Take your example. You made $1300 in income on a job, spent $300 on supplies for a net income of $1000. If this is your only expense the government will tax the $1000 at the bracket you or company fall into.
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Old 10-22-2018, 01:09 AM   #4
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Quote:
Originally Posted by proncpainter View Post
I was told the business pays taxes after the money on the business bank account.
So the account has $1.300 balance because the LLC got $1300 check for a work but the supplies were $300. How does the IRS know that the LLC made $1000 while the account shows $1300? The $300 is not an income, just paint, drop cloth, tape...
The statement doesn't tell anything about supplies. Does it?

Maybe it is a stupid question but would be happy if someone explained.
There is an old saying, the only things that are sure in this life are death and taxes. Believe it!!!
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Old 10-22-2018, 09:08 AM   #5
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how much money did you make? Send it in. That's how taxes work.
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Old 10-22-2018, 09:13 AM   #6
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The best non-accountant advice I could give you right now would be to keep good records for your income and your expenses. I don’t use an app for that but many do and could suggest some good ones. Short of that, go online and get a list of items and categories of business expenses that are deductible and start recording your amounts for each job that come under one of those areas. Also, look into monthly expenses (ex. insurance), and even yearly ones (ex. licensing fees) that can also be deducted.

Also, develop a system for organizing your receipts - again there are some good apps for this but personally I am old school and keep a job envelope for each project where all my receipts get recorded and stored. Regardless of how you do it, just get a system in place and then use it!

Whether you use an tax program like Turbo Tax, or an accountant, having thorough and well organized records can make tax time a heck of a lot easier and (hopefully) less painful.
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Old 10-23-2018, 02:13 AM   #7
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If you have any friends that own businesses I’d recommend asking them for help or advice. You can learn so much from their mistakes and their succes.

One of the most important things you can do is keep all business related receipts. Materials you buy at the paint store, tools from Home Depot, insurance payments, etc...

Also keep track of your mileage for all business related travel.

If you’re not comfortable doing your own taxes you may want to hire a tax account or you could use Turbo Tax.




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Old 10-23-2018, 07:16 PM   #8
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Thank you!
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